Average gross price of milk in Brazil closes at 1.0416 reais/liter in December, down 5.4% from November amid weak demand, increase of milk prices in almost all states, CEPEA says

PIRACICABA, Brazil , January 20, 2014 (press release) – The average milk price paid to producers wrapped up December with sharp decreases, confirming the players’ expectations. The drop is still attributed to the weak demand and the increase of milk purchases in almost all states surveyed by Cepea, except in Rio Grande do Sul and Santa Catarina.

In December, the average gross price in Brazil (including freight and taxes) closed at 1.0416 real per liter, tumbling 5.4% (5.9 cents of Real) compared to the previous month. As for the net price (neither freight nor taxes are included), the average was 0.9602 real per liter in December, for a sharp decrease of 5.8% in relation to November. These averages are calculated by Cepea and are weighted by the volume purchased in Goiás, Minas Gerais, Paraná, Rio Grande do Sul, Santa Catarina, São Paulo and Bahia.

In spite of price drops, levels continue high comparing to those in the year before. The average of December 2013 surpasses in 11.09% that in Dec/12 (0.9376 real per liter), in real terms. Considering the entire year of 2012, when the price average was 0.9332 real per liter, the increase is 10.48% - the average in 2013 is 1.0310 real per liter.

Considered an atypical year, 2013 registered milk price rises in almost all months – in August, the average price was the highest over the last six years in real terms (disregarding the inflation in the period). Quotes kept the upward trend in the following months and, in October, hit the highest levels of the entire Cepea series. The increase is attributed mainly to the heated domestic demand.

In the last two months of the year, rains favored the quality of pastures and the consequent increase of milk purchases, which hit a new record. From October to November, the Index for Milk Purchases (ICAP-Leite Cepea) upped 3.51%. São Paulo, Goiás and Bahia States were highlighted in the period, with increases of 8.15%, 7.12% and 6.92%, respectively.

Besides weather conditions, several milk producers invested in farms due to high price levels registered over the last months, which favored to push up even more the supply available currently. The higher level of milk purchases, in turn, favored the increase of stocks in almost all regions surveyed by Cepea, resulting in lower needs to purchase from the industry.

In the by-products market, quotes have also moved down, due to high stocks and the de weak demand for dairy products. Price averages of UHT milk and mozzarella cheese traded in the wholesale market of the Greater São Paulo in the partial December (until Dec. 26) closed at 2.013 reais per liter and 12.326 reais per kilo, downing 7.62% and 3.47%, respectively, compared to averages in November. This research occurs daily with dairy companies and wholesalers, and is financially supported by OCB (Brazilian Cooperative Organization) and CBCL (Brazilian Confederation of Dairy Cooperatives).

In December, the gross price of milk paid to producers downed in all states surveyed by Cepea. The most significant decrease was verified in Goiás and Santa Catarina, of 7.23% in both regions. (Cepea-Brazil)

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